It has been a tumultuous year for power sector marked by several ups and downs. The cancellation of 204 coal blocks due to Hon'ble Subrme Court's decision followed by an aggressive e-auction of the coal mines, a new scheme of reverse e-auction of gas for revival of stranded and partly - stranded gas power plants, Government of India (Gol) in RE - Invest 2015 gave a push to the world's largest renewable capacity expansion program being run in India. These measures coupled with reforms in the loss-laden electricity distribution sector, have been aimed to re-energise the sector, however, t he road that lies ahead of us is dotted with challenges.

GROWTH ALONG THE POWER VALUE CHAIN

The Gol has accelerated measures to resolve t he issues confronting the sector. Some of the highlights of the year are as under:

A chain is as strong as its weakest link, the same is true for the power value chain, each link has to keep pace with the other to achieve a sustainable performance in future. The developments, achievements and issues in various segments of the industry have been discussed in the ensuing paragraphs.

1. Capacity and Generation

The addition to total installed capacity during financial year 2014-15 was -26464 MW (including RES), a growth of 10.8% over brvious year installed capacity. The capacity addition excluding RES during the first 3 years of 12th Plan is 61014 MW which has not only exceeded the capacity addition of 54964 MW of t he entire 11th Plan but also constitutes 68.9% of t he total 12th Plan target of 88537 MW (Source : CEA, MoP).

While private sector has almost doubled the capacity in 3 years and increased its share to 38%, however, it has the least share of 27% in actual generation. The all India Plant Load Factor (PLF) of thermal capacity for financial year 2014-15 has dropped to 64.46% from 65.56% in financial year 2013-14 (Source: CEA). The expected rise in demand due to industrial and GDP growth are likely to improve PLFs.

To keep up the pace of capacity addition and generation, Gol has proposed 5 new Ultra Mega Power Projects (UMPPs) of 20 GW attracting an investment of more than Rs.1 lakh crore.

2. Transmission

The transmission network (at voltages of 220 kV and above) in the country has grown at a rate of 6-7% p.a. till now in the 12th Plan and is in line to achieve t he target for t he plan period.

Inter-regional transmission capacity has become 46450 MW as on 31.03.2015 and has increased at 18.7% p.a. since end of 11th plan.

The AC substation transformation capacity has increased to 582600 MVA as on 31.03.2015 at the rate of 13.4% p.a. and the HVDC substation capacity has increased to 13500 MW as on 31.03.2015 at 11.5% p.a. in the last 3 years. (Source: CEA)

Over the next few years, the demand for transmission capacity is expected to increase significantly, driven primarily by significant increases in generation capacity and also due to requirements of open access, interregional transfers and integration of renewable power in the system.

Initiatives for the future:

• National Smart Grid Mission: has been approved to bring efficiency in power supply network and facilitate reduction in losses and outages.

• Green Energy Corridor: Projects amounting to Rs. 38,000 crore are being rolled out to ensure evacuation of renewable energy.

3. Distribution

The electricity business is not merely about setting up power generation stations and transmission systems, but equally, and probably more crucially, about retailing electricity and recovering the cost of service from consumers. Despite several schemes for revival of the distribution segment the financial and operational health ofthediscoms remains bleak.

The average tariff has increased in the past f ew years, but the rise has not been commensurate with the increase in the cost of supply. Theconsistent revenue gap, coupled with high AT&C losses have piled up huge losses for the state utilities.

Electricity Act is being amended to give consumers a choice to choose and change power service provider like a mobile connection. Competition will lead to lower tariffs and better service, Power sector cannot deliver its social commitment until it is commercially and financially viable, and hence strengthening the distribution segment should be done on war footing to bring long term sustainability.

4. Power Trading

Power trading market accounts for an average of ~7-9% of total generation. The total power traded in financial year 2014-15 is 80 BUs (provisional) as against 83 BUs in brvious financial year. (Source: Central Electricity Regulatory Commission (CERC) reports) Open access to consumers, share of merchant power in upcoming independent power plants, improving financial health of discoms who would buy merchant power at market prices instead of load shedding, regional imbalances of energy and peak deficit, resolution of constraints of power flow to southern region, establishment of distribution franchisees etc. are some drivers for power trading business in India.

5. Fuel

Coal is the mainstay of power sector in India. The fuel mix of installed capacity as on 31.03.2015 is charted below:

Coal production in the country has risen significantly and leading the way is Coal India Limited (CIL) the country's single largest coal producer. Raw coal production by CIL in financial year 2014-15 is ~494 MT an increase of 7% over brvious fiscal. Gol has also set an ambitious target of doubling CIL's production to ~1000 MT by 2020. (Source: CIL website and MoP)

Brisk steps have been taken by Gol to address the potential crisis from cancellation of 204 coal blocks by Subrme Court. Out of the above 29 coal blocks have been auctioned, 38 coal blocks have been allotted to PSUs and the reallocation of remaining mines is targeted for financial year 2015-16. (Source: Ministry of Coal)

The idea of coal linkage rationalisation had been mooted in 2010 and a new inter-ministerial task force was set up in June 2014. This exercise will enable linking plants with their nearest coal mines to ensure minimum transportation of coal, unclog railway network and pass on savings of ~$1billion (~Rs. 6000 crore) to consumers (Source: MoP).

Gol has also implemented scheme for utilisation of Gas based Power Generation Capacity - a scheme for supply of imported Re-gasified Liquefied Natural Gas ("e-Bid RLNG") to the 14035 MW of fully stranded gas based plants (plants with no supply of domestic gas) and 9845 MW of partly stranded plants (with limited availability of domestic gas). The plants are selected based on reverse e-bidding mechanism for the financial support given by the Government, so that the net price of power for the Discoms is available at or belowRs. 4.70/unit and Rs. 3.39/ unit respectively for the t w o categories of power plants. The scheme also envisages sacrifices to be made collectively by all stake holders i.e. Gol, State Govt., re-gasifier, gas supplier, transporter, power developer, banks, etc. to make the RLNG viable for power generation. The scheme is valid for t w o years i.e. till March, 2017 (Source: MoP).

Renewables - a double revolution in the making

The quest for energy independence, economic growth and environmental sustainability increasingly suggests the importance of renewable energy sources. The mining, transporting and burning of coal is associated with heavy social and environmental costs, hence the thrust on developing sustainable renewable power is quintessential.

Gol has set an ambitious target of renewable energy capacity of 175000 MW by 2022 comprising of 100000 MW Solar, 60000 MW Wind, 10000 MW Biomass and 5000 MW Small Hydro Power. The solar target will principally comprise of 40 GW rooftop and 60 GW through large and medium scale grid connected solar power projects. The new solar target is expected to abate over 170 million tonnes of C02 over its lifecycle. (Source: MoP)

Thus, we might be looking at a twin energy revolution in India. The first revolution is a shift from fossil fuels (mainly coal) to renewables (primarily solar). As a consequence of the first, the second revolution will be a transformation of the industry in which we shall see much more distributed power generation, many more market participants and a more flexible grid.

Considering the massive potential of renewable energy in the country and the incentives doled out by Gol, the targets looks achievable but not before overcoming several challenges like - high cost of renewable power; financing the huge capacity given the off take risks due to the poor financial health of buyers; enforcing renewable purchase obligations; huge land requirement; parallel investment in infrastructure for evacuation of power; ensuring grid stability; flexible grid; thermal backup when renewable is offline etc.

6. Demand and Supply

The energy requirement registered a growth of 6.5% and peak demand grew at 9.0% during the financial year 2014-15. The energy and peak deficit during financial year 2014-15 was 3.6% and 4.7% and is likely to go further down to 2.1% and 2.6% respectively, despite very high shortages likely to be experienced by southern region (Source : Load Generation and Balance Report 2015-16). The demand is believed to be supbrssed due to poor financial health of discoms who find supplying power at existing tariffs unviable.

The energy requirement will go up once the latent demand is unlocked. Industrial consumption is the maximum and most remunerative in India, growth in industrial activity will fuel power demand in the country. Further, still large population to the tune of ~28 crore are without access to power. The per capita consumption of power in India still remains abysmal at 1010 units (provisional) for financial year 2014-15. Gol has also set a target to provide 24x7 Power for all by 2019 (Source: CEA; MoP). Given the above scenario the long term outlook for power demand remains strong.

7. Major Regulatory Developments in the Sector

Some of the important Regulatory developments of 2014-15 are as follows:

CERC in June 2014 issued the CERC (Power System Development Fund) Regulations 2014.

The main constituent of the PSDF are congestion charges, deviation settlement charges, regional load despatch centre reactive energy charges, additional transmission charges arising out of short term open access transactions and any other charges as maybe notified by the Commission from time to time.

This fund can be utilized for the purposes of transmission systems of strategic importance, installation of reactive energy generators, special protection schemes, for relieving congestion and for projects having a bearing on the grid security. Recently the e-bid RLNG scheme for stranded gas plants has also been a beneficiary of PSDF.

2. The Electricity (Amendment) Bill, 2014 :

Introduced in Lok Sabha in December 2014 seeks to amend the Electricity Act, 2003. Primarily, it seeks to segregate the distribution network from the electricity supply business. It also seeks to introduce multiple supply licensees in the market.

It also seeks to promote provision of electricity through Smart Grid and install smart meters for proper accounting and measurement of the consumption and metering of electricity.

3. Proposed amendments to National Tariff Policy :

Ministry of Power has proposed several changes to the National Tariff Policy. Some changes are significant, like the proposal to substantially increase solar renewable purchase obligation (from 3% by 2022 to 8% by March 2019), to remove inter-state transmission charges on renewable power, permits third party sale of un-requisitioned power for better utilization of generating capacity etc.

4. Renewable Energy Act: A draft Renewable Energy Act has been brpared by MNRE. The draft Act proposes institutional structure, supportive eco-system, economic and financial framework, constitution and operation of national and state level funds to promote the production of energy from renewable energy sources in order to reduce dependence on fossil fuels. MNRE is brsently seeking comments of stakeholders on the draft Act.

Opportunities ahead - moving the Indian power juggernaut

Gol is planning to auction five new UMPPs in the plug and play mode, with coal linkages and clearances in place, to ensure faster execution.

Gol's move to introduce competition in the distribution segment (as proposed in the amendments to Electricity Act 2003), could offer new business opportunities and investment in building stronger networks and infrastructure. Other exciting opportunities in the pipeline lie in the distribution segment due to launching of DDUGJY for agriculture feeder separation and IPDS for improving urban power infrastructure. The renewable push and other encouraging developments of the sector are the building blocks for reinforcing the investment sentiments in the power sector which accounts for the highest share of investment in infrastructure space in India.

OUTLOOK AND OPPORTUNITIES FOR THE COMPANY

Strategic focus of the Company

Your Company will continue to be an integrated power player across the value chain which gives it a competitive edge in the market.

However, the focus areas will be to scale up generating capacity through a mix of conventional and non-conventional fuel sources, developing own coal mines and providing other value adding services like power trading , consultancy etc.

The key is not to add capacity alone, but to see that the capacity which has been added is financially viable and also does not become stranded. Our Board of Directors give investment approval only after having in place 5 basic requirements viz. land, water, environment clearance, fuel supply arrangements and power purchase agreement(s) (PPAs) in place.

In-organic growth opportunities

Your Company is also evaluating acquisition of power plants at attractive valuations for adding capacity after analysing the technical and financial viability of the project(s). Considering a lot of capacity of private/state developers is stranded there is a good scope of consolidation in the sector.

Fuel Security

There is a lot of Gol focus on improving coal supplies over the next five years; accordingly the Company expects to receive better coal supplies under its long term coal supply agreements. Coupled with its captive coal mines, your Company strives to ensure long term fuel security.

Some of our coal blocks got cancelled as a consequence of Subrme Court's decision; however we have been reallocated 8 captive coal mines (considering Chatti Bariatu-South has been merged with Chatti Bariatu) with estimated geological reserves of ~5 billion tonnes. Your Company led the coal rationalisation initiative of Gol by entering into a coal swapping arrangement for Sipat Super Thermal Power Project with Gujarat State Electricity Corporation Limited to reduce transport costs and avoid criss-cross movement of coal to decongest the railway network.

Renewable Energy

While coal will remain the mainstay of the Company's power portfolio, however given the importance of renewable energy globally and for India, it will see enhanced focus in the coming years to achieve sustainable generation mix. Your Company has commissioned Koldam (4x200 MW), its first hydro project and is also committed to add 10 GW of own renewable power capacity, select solar power developers for 15 GW under Jawaharlal Nehru National Solar Mission in next 5 years and be involved in sale and purchase of solar power. Your Company takes cognisance of the challenges of adding renewable energy capacity in India and will add capacity progressively,

Off-take and realisation

Although looking at the energy and peak deficit numbers one tends to question the future demand, however your Company believes that the ground reality will be different once the structural reforms in the distribution segment of the sector shows results in thefinancial healthof the discoms and the economic growth of the country accelerates.

Almost, the entire output of the Company's power stations has been contracted under long term PPAs. Further, your Company produces power at a very competitive cost, the average tariff for financial year 2014-15 was Rs.3.28/kWh. Low cost of power mitigates off-take risks.

Your Company for the 12th consecutive year realised 100% of its dues and is confident of maintaining its track record in future also.

Leveraging on strengths for delivering better future performance

Your Company derives competitive edge from its strengths and is confident of meeting future challenges in the sector.

a. Project Management

Your Company has adopted an integrated system for the planning, scheduling, monitoring and controlling of approved projects under implementation. To coordinate and synchronise all the support functions of project management it relies on a three-tiered project management system known as the Integrated Project Management Control System which integrates its engineering management, contract management and construction management control centres.

The operating performance of your Company has been considerably above the national average. During the financial year 2014-15, PLF of coal stations was 80.23% against all India PLF of 64.46%. Over the years, your Company has consistently operated at much higher operating efficiency as compared to All India operating performance.

In order to sustain the imbrssive operational efficiency levels, your Company's strategy includes:

> With the aim of improving system wide reliability, reducing maintenance costs and outages, Special Analytics and Computational Services Centre has been established. It provides early warning of slowly evolving equipment problems to the remotely located plant personnel.

> Use of tools for data acquisition and analysis for on-site efficiency evaluation and math-modeling tools like Performance Evaluation of Power System Efficiencies for verifying equipment and system efficiencies, Steam path audit for estimation of solid particle erosion and efficiency of steam turbine components etc.

> Creation of peer group knowledge teams for each equipment to harmonize the best practices at enterprise level.

> Use of a combrhensive Performance Evaluation Matrix for 000000relative evaluation of the performance of various power plants over a set of combrhensive performance indicators to create an environment of in-house challenge and competition.

> Use of Process Interface (PI) System and PI System based applications for real time efficiency and loss calculations for ensuring early actions to minimize station losses.

> A structured Auxiliary Power Consumption (APC) reduction programme has been formulated to optimise APC during start up and low load operation.

c. Human Resources

Your Company has been conferred with various HR awards over the years by reputed institutions. Your Company has a highly talented team of committed professionals and has been able to induct, develop and retain the best talent. The commitment of the employees is also reflected in terms of financial parameters such as sales/employee, PAT/per employee, value added/per employee etc. We have a pool of ~24,000 employees creating value for the Company. NTPC has a very low executive attrition rate.

d. Sound Corporate Governance

Your Company's corporate governance practices has been recognised and awarded at several forums. It enjoys the confidence of investors and all other stakeholders alike. Your Company not only believes in adopting best practices but also includes public interest in its corporate priorities and has developed extensive social outreach programmes,

e. Robust financials and systems

Your Company has strong financial systems in place. It believes in prudent management of its financial resources and strives to reduce the cost of capital. It has robust financials leading to strong cash flows which are being progressively deployed in generating assets. Your Company has a strong balance sheet coupled with low gearing and healthy coverage ratios. As a result, your Company has been able to raise resources for its capital expansion projects at very competitive interest rates.

RISK, CONCERNS AND THEIR MANAGEMENT

Your company has an elaborate Enterprise Risk Management framework in place. Afunctional director level committee called Risk Management Committee (RMC) has been constituted in compliance with the Companies Act, 2013 and Clause-49 of the listing agreement. The RMC is responsible to identify and review the risks and to formulate action plans and strategies to mitigate risks on short term as well as long term basis.

The RMC has identified 26 key risks and out of which following 8 have been classified as the t op risks for the company:

• Inadequate fuel supply

• Difficulties in acquisition of land

• Delay in execution of projects

• Risks related to coal mining

• Risks pertaining to Hydro projects

• Compliance of emission, ash utilization and regulatory norms

• Sustaining efficient plant operations

• Risks of not getting schedule

These areas are regularly monitored through reporting of key performance indicators of the identified risks. Exceptions with respect to risk assessment criteria are reported regularly to the Board of Directors. During the financial year 2014-15, Committee meetings have been held for all the quarters to deliberate on strategies.

Internal Control

To ensure regulatory and statutory compliance as well to provide highest level of corporate governance, your Company has robust internal systems and processes in place for smooth and efficient conduct of business and complies with relevant laws and regulations. A combrhensive delegation of power exists for smooth decision making which is being further reviewed to align it with changing business environment and for speedier decision making. Elaborate guidelines for brparation of accounts are followed consistently for uniform compliance. In order to ensure that all checks and balances are in place and all internal control systems are in order, regular and exhaustive internal audits are conducted by the experienced firms of Chartered Accountants in close co-ordination with the Company's own Internal Audit Department. Besides, the Company has two committees of the Board viz. Audit Committee and Committee on Management Controls to keep a close watch on compliance with Internal Control Systems.

A well defined internal control framework has been developed identifying key controls. The supervision of operational efficiency of designed key controls is done by Internal Audit. The framework provides elaborate system of checks and balances based on self assessment as well as audit of controls conducted by Internal Audit at the process level. Gap Tracking report for operating efficiency of controls is reviewed by the management regularly and action istaken to further strengthen the Internal Control System by further standardizing systems & procedures and implement process changes, wherever required, keeping in view the dynamic environment in which your Company is operating. The Internal Control Framework system brsents a written assessment of effectiveness of Company's internal control over financial reporting by the process owners to facilitate certification by CEO and CFO and enhances reliability of assertion.

FINANCIAL DISCUSSION AND ANALYSIS

A detailed financial discussion and analysis on Financial Statements is furnished below. Figures of brvious year have been regrouped/ rearranged wherever necessary. Reference to Note(s) in the following paragraphs refers to the Notes to the Financial Statements for the financial year 2014-15 placed elsewhere in this report:

The revenue of the Company comprises income from energy sales (net of electricity duty), consultancy and other services, interest earned on investments such as term deposits with banks, bonds (issued under One Time Settlement Scheme) and dividend income from subsidiary & joint venture companies and mutual funds. The total revenue for financial year 2014-15 is Rs. 75,362.37 crore as against Rs. 74,664.61 crore in the brvious year registering an increase of 1%.

The major revenue comes from energy sales. The tariff for computing energy sales is determined in terms of Central Electricity Regulatory Commission Regulations as notified from time to time which are briefly discussed below:

Tariff for computation of Sale of Energy

The Central Electricity Regulatory Commission (CERC) notified the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 (Regulations, 2014) on 21st February, 2014 for the period 2014-19. Pending issue of final/provisional tariff orders under Regulations, 2014 by the CERC, sales have been provisionally recognized on the basis of principles enunciated in Regulations, 2014. As per the Regulations, 2014, the tariff for supply of electricity comprises of two parts i.e. Capacity Charges for recovery of Annual Fixed Cost based on plant availability and Energy Charges for recovery of fuel cost. In addition, Regulations also provide for the recovery of certain miscellaneous charges. The CERC sets tariff for each stage of a station in accordance with the notified tariff regulations/norms.

Capacity Charges

The capacity charges are allowed to be recovered in full if plant availability is at least 83%. If the availability of the plant is lower than 83%, the capacity charges are recovered on a pro-rata basis based on normative parameters as specified in the said Regulations.

Further, under the Regulations, 2014, the provision for the recovery of capacity charges in full at the plant availability of 83% is subject to the review which shall be made after 3 years from 01.04.2014.

Energy Charges

Energy charges for the electricity sold are determined on the basis of landed cost of fuel applied on the quantity of fuel consumption derived on the basis of norms for heat rate, auxiliary power consumption, specific oil consumption etc.

Other Charges

Besides the capacity and energy charges, the other elements of tariff are:

• Deferred tax liability for the period upto 31.03.2009 on generation income is allowed to be recovered from the customers on materialization.

• Cost of hedging in respect of interest and repayment of foreign currency loans and exchange rate fluctuations for the un-hedged portion of interest and repayment of foreign currency loans on a normative basis.

In addition, the Central Electricity Regulatory Commission (Deviation Settlement Mechanism and related matters) Regulations, 2014, provides for charges for the deviations in generation with respect to schedule, payable (or receivable) at rates linked to average frequency to bring grid discipline and security.

Each element of total revenue is discussed below:

Energy sales (including electricity duty)

Your Company sells electricity to bulk customers mainly, electricity utilities owned by State Governments as well as private discoms operating in States. Sale of electricity is made pursuant to long-term Power Purchase Agreements (PPAs) entered into with beneficiaries.

Income from energy sales (including electricity duty) for the financial year 2014-15 was Rs. 73,197.61 crore which constituted 97% of the total revenue. The income from energy sales (including electricity duty) has increased by 2% over the brvious year's income of Rs. 72,115.06 crore.

During the year, there is an increase in the commercial capacity by 695 MW as detailed under-

Further, the commercial capacity of 1565 MW comprising Unit#2 of 500 MW of Vindhyachal-IV, Unit#2 of 500 MW of Rihand-lll, Unit#2 of 500 MW of Mouda-1,5 MW of Solar PV capacity at Faridabad, 10 MW of Solar PV capacity each at Ramagundam, Talcher and Unchahar and 30 MW of Solar PV capacity at Rajgarh which were declared under commercial operation during the financial year 2013-14, were available for the entire financial year 2014-15 as compared to part of financial year 2013-14.

For the financial year 2014-15, pending issue of provisional/final tariff orders w.e.f. 01.04.2014 for all the stations, billing to the beneficiaries was done according to the tariff approved and applicable as on 31.03.2014, as provided in the Regulations, 2014 (Note 22 (a)). The amount provisionally billed for the year ended March 31, 2015 on this basis is Rs. 73,703.99 crore.

Your Company has filed a petition before the Hon'ble High Court of Delhi contesting certain provisions of the Regulations, 2014. Pending issue of provisional/final tariff orders under Regulations, 2014 by the CERC and disposal of the petition, sales have been provisionally recognized on the basis of principles enunciated in Regulations, 2014. The sales provisionally recognized for the year ended March 31, 2015 on this basis is Rs. 73,133.81 crore (Note 22(b)).

Sales include Rs. 679.62 crore pertaining to brvious years recognized based on the orders issued by the CERC/Appellate Tribunal for Electricity (Note 22 (c)).

Sales also include (-) Rs. 1,399.42 crore on account of income-tax payable to the beneficiaries as per Regulations, 2004 (Note 22 (d)).

As per Regulations, 2014, the deferred tax liability for the period before 01.04.2009 shall be recovered from the beneficiaries whenever it materializes. Accordingly, sales also include Rs. 113.96 crore on account of deferred tax materialized which is recoverable from beneficiaries (Note 22 (d)).

Sales also include electricity duty on energy sales amounting to Rs. 669.64 crore. The same has been reduced from sales in the statement of profit and loss.

The average tariff for the financial year 2014-15 is Rs. 3.28/kWh as against Rs. 3.30/kWh in the brvious year. The average tariff includes adjustments pertaining to brvious years. If the impact of such adjustments were to be excluded, the average tariff would be Rs. 3.25/ kWh in financial year 2014-15 as against Rs. 3.20/kWh in the brvious year,

There has been 100% realization of the dues within the stipulated time frame for the twelfth year in succession. All the beneficiaries have opened and are maintaining Letter of Credit equal to or more than 105% of average monthly billing as per One-Time Settlement Scheme (OTSS). In order to ensure prompt and early payment of bills for supply of energy to beneficiaries, your Company has formulated a rebate scheme by way of providing graded incentive for early payment based on the bills raised on state utilities who are the members of NTPC's rebate scheme.

Under OTSS, tri-partite agreements are valid up to October 31, 2016. For the period beyond October 2016, the supplies to state utilities shall be covered by an escrow arrangement. The supplementary agreements signed with state utilities have a provision of keeping a first charge on their revenue streams for supplies made by your Company. Under the supplementary agreements, the state utilities have agreed to provide payment security through execution of the hypothecation agreement and the default escrow agreement.

Further, this will be over and above the LC requirement of 105% of average monthly billing. Moreover, your Company can resort to regulation/diversion of power supply to third party at the risk and cost of defaulting utilities in case of non-payment of dues.

Consultancy and other services

Accredited with an ISO 9001:2008 certification, the Consultancy Division of your Company undertakes consultancy and turnkey project contracts for domestic and international clients in the different phases of power plants viz. engineering, project management, construction management, operation & maintenance of power plants, Research & Development, Management Consultancy etc.

During the financial year 2014-15, Consultancy Division posted an income of Rs. 100.78 crore as against Rs. 105.28 crore achieved in the last financial year. In the financial year 2014-15, it has recorded a profit after tax of Rs. 20.39 crore as against Rs. 19.23 crore in the last financial year. A total of 25 orders valued at Rs. 65.95 crore were secured by the division during the year.

Energy Internally Consumed

Energy internally consumed relates to own consumption of power for construction works at stations, township power consumption, etc. It is valued at variable cost of generation and is shown in 'Revenue from Operations' with a debit to corresponding expense head under power charges. There is an increase of 3% in the value of energy internally consumed during the year over the brvious year mainly due to increase in fuel cost.

Interest from beneficiaries

CERC Regulations provide that where after the truing-up, the tariff recovered is less than the tariff approved by the CERC, the Company shall recover from the beneficiaries the under recovered amount along-with simple interest. Accordingly, the interest recoverable from the beneficiaries amounting to Rs. 332.82 crore has been recognised as Interestfrom beneficiaries.

Provisions written back

During the financial year 2014-15, the Company has written back provisions made in earlier years amounting to Rs. 186.15 crore in comparison to Rs. 199.87 crore in the financial year 2013-14. Provision written back includes a write back of Rs. 180.16 crore on account of tariff adjustments during the financial year 2014-15 as against Rs. 162.56 crore in the financial year 2013-14.

Other Income (Note 23)

'Other income' mainly comprises interest income from bonds issued under One Time Settlement Scheme (OTSS), income from term deposits with banks, dividend from investments in mutual funds and equity investment in subsidiary & joint venture companies and miscellaneous income.

Interest income from OTSS bonds (including loan to StateGovernment) for financial year 2014-15 is Rs. 263.35 crore as compared to Rs. 409.39 crore in financial year 2013-14. The reduction in interest income to the extent of Rs. 146.04 crore is due to redemption of OTSS bonds amounting to Rs. 1,636.96 crore and repayment of loan in lieu of settlement of dues to State Government amounting to Rs. 95.73 crore. The Company has earned income of Rs. 1,421.23 crore during the financial year 2014-15 on account of term deposits made in banks and investments in mutual funds as against Rs. 1,667.65 crore earned last year. The income from investment in bank term deposits and mutual funds has registered a decline of 15% from last financial year attributed to decrease in earnings on account of lower interest rates as well as decrease in average annual investment from Rs. 18,213 crore in financial year 2013-14 to Rs. 16,653 crore in financial year 2014-15. We have earned Rs. 90.61 crore as dividend from our investments in joint venture companies and Rs. 26.00 crore as dividend from investments made in subsidiary companies. Further, Rs. 1.04 crore has been earned as interestfrom loan of Rs. 3.43 crore (as at March 31,2015) extended to Kanti Bijlee Utpadan Nigam Limited, one of our subsidiary companies. Also, an amount of Rs. 515.99 crore has been earned from various other sources mainly consisting of net gain in foreign currency transactions & translations of Rs. 128.38 crore, sale of scrap Rs. 80.18 crore, surcharge received from beneficiaries Rs. 49.97 crore, interest from contractors Rs. 49.67 crore, interest on loans to employees Rs. 31.13 crore and miscellaneous income o fRs. 134.10 crore, etc.

2 Expenses (Note 24, 25 & 26)

2.1 Expenses related to operations

The expenditure incurred on fuel, employee benefits expense and generation, administration and other expenses for the financial year 2014-15 was Rs. 57,494.28 crore as against the expenditure of Rs. 54,198.34 crore incurred during the brvious year. In terms of expenses per unit of power produced, it was Rs. 2.39 per unit in financial year 2014-15 as against Rs. 2.33 per unit in financial year 2013-14. Component-wise, there has been an increase in the fuel cost and generation, administration and other expenses. However, employee benefits expense has marginally decreased. The increase in commercial generation due to commercial operation of new units i.e. units declared under commercial operations during the year as well as units declared under commercial operation during financial year 2013-14 which were under operation for part of the brvious year as against under operation for full year during the current year has resulted in an additional operational expenditure of Rs. 2,623.45 crore.

A discussion on each of these components is given below:

2.1.1 Fuel

Expenditure on fuel constituted 85% of the total expenditure relating to operations. Expenditure on fuel was Rs. 48,845.19 crore in financial year 2014-15 in comparison to Rs. 45,829.71 crore in financial year 2013-14 rebrsenting an increase of about 7%. The break-up of fuel cost in percentage terms is as under:For the financial year 2014-15, the expenditure towards coal has increased, which is partly due to higher coal consumption on account of increase in coal based generation and partly due to higher average price of coal during the financial year 2014-15 as compared to brvious year. A part of t he increase in expenditure is also attributable to higher blending ratio of costlier imported coal. The expenditure towards gas has also increased, although there is a decrease in the gas consumption on account of decrease in generation from the gas based units, however due to the higher average price of gas during the financial year 2014-15 as compared to brvious year there is an increase in the total gas cost.

The average price of other component of fuel cost i.e. oil and naphtha have also shown marginal change in terms of average price. The average price of oil has decreased while the average price of naphtha has increased during the financial year 2014-15 as compared to the average prices of oil and naptha in the brvious year.

An increase of Rs. 2,312.29 crore in fuel cost is attributable to new commercial capacity added during the year as well as on commercial capacity added during brvious year which was operational for part of the brvious year as compared to full year operations during the current year.

Over all, fuel cost per unit generated increased to Rs. 2.03 in financial year 2014-15from Rs. 1.97 in financial year 2013-14.

The power plants of t he Company use coal and natural gas as the primary fuels. Oil is used as a secondary fuel for coal-fired plants and naphtha as an alternate fuel in gas-fired plants. Under t he tariff norms set by the CERC, your Company is allowed to pass on fuel charges through the tariff, provided the Company meets certain operating parameters.

The detail of fuel supply position is discussed elsewhere in the Director's Report.

Employees benefits expense have decreased by 4% from Rs. 3,824.78 crore in financial year 2013-14 to Rs. 3,669.78 crore in financial year 2014-15. The decrease in the Employees benefits expense is reflected due to higher expenses in the financial year 2013-14 on account of additional contribution made towards the implementation of defined contribution pension scheme in that year.

Of the total increase in employees benefits expense, an increase of Rs. 65.94 crore is attributable to new commercial capacity added during the year as well as on commercial capacity added during brvious year which was operational for part of the brvious year as compared to full year operations during the current year.

In terms of expenses per unit of generation, it is Rs. 0.15 in financial year 2014-15 as compared to Rs. 0.16 in brvious financial year. These expenses account for approximately 6% of operational expenditure in financial year 2014-15.

2.1.3 Generation, Administration and Other Expenses (Note 26)

Generation, administration and other expenses consist primarily of repair and maintenance of buildings, plant and machinery, power and water charges, security, insurance, training and recruitment expenses and expenses towards travel, communication and provisions. These expenses are approximately 9% of operational expenditure in financial year 2014-15. In absolute terms, these expenses increased to Rs. 4,979.31 crore in financial year 2014-15 from Rs. 4,543.85 crore in financial year 2013-14 registering an increase of 10%. In terms of expenses per unit of generation, it is Rs. 0.21 in financial year 2014- 15 as compared to Rs. 0.20 in brvious financial year. An increase of Rs. 245.22 crore is on account of new commercial capacity added during the year as well as on commercial capacity added during brvious year which was operational for part of t he brvious year as compared to full year operations during the current year.

Repair & maintenance expenses constitute 40% of total generation, administration and other expenses and have increased to Rs. 1,991.26 crore from Rs. 1,852.33 crore in brvious year, resulting in an increase of 8%.

During the financial year 2014-15, the Company had made provisions amounting to Rs. 224.78 crore. This includes a provision of Rs. 148.10 crore towards tariff adjustments, Rs. 41.95 crore towards unserviceable capital work-in-progress, Rs. 13.97 crore towards obsolescence in stores, Rs. 5.00 crore towards unfinished minimum work programme for oil and gas exploration and Rs. 4.63 crore towards permanent diminution in the value of investment by the Company in t w o of its joint venture company i.e. BF-NTPC Energy Systems Ltd. Rs. 3.35 crore and Pan-Asian Renewables Pvt. Ltd. Rs. 1.28 crore.

2.2 Finance Costs (Note 25)

The finance costs for the financial year 2014-15 were Rs. 2,743.62 crore in comparison to Rs. 2,406.59 crore in financial year 2013-14.

Interest on borrowings (including interest during construction) has increased by 17% over last financial year due to increase in long term borrowings (net of repayment) during the year by Rs. 18,825.12 crore mainly on account of issue of bonus debentures amounting to Rs. 10,306.83 crore. In addition, the average cost of borrowing has increased to 8.07% in financial year 2014-15 from 7.81% in brvious financial year. The increase in the average cost of borrowing is on account of higher rate of interest on new Rupee borrowings.

For t he financial year 2014-15, an amount of Rs. 2,881.28 crore relating to finance costs of projects under construction was capitalized while the corresponding amount for the brvious year was Rs. 2,488.85 crore. Thus, finance costs capitalized registered an increase of 16%. In addition, Rs. 87.83 crore has been capitalized in respect of development of coal mines as against Rs. 78.04 crore in brvious year.

2.3 Debrciation and amortization expense (Note 12)

The debrciation and amortization expense charged to the statement of profit and loss during the financial year 2014-15 was Rs. 4,911.65 crore as compared to Rs. 4,142.19 crore in financial year 2013-14, registering an increase of 19%. This is due to increase in the gross block by Rs. 11,485.53 crore i.e. from Rs. 1,16,992.06 crore in the brvious financial year to Rs. 1,28,477.59 crore in the current financial year. The increase in gross block is largely on account of increase in commercial capacity by 695 MW resulting in additional capitalization on account of commercial declaration of new units as discussed under "Energy Sales". The debrciation on new units capitalized during the year is on pro-rata basis.

Further, debrciation for units declared commercial during financial year 2013-14 aggregating to 1565 MW as already discussed under "Energy Sales" has been charged for the entire financial year 2014- 15 as against a pro-rata charge during the financial year 2013-14. The impact on debrciation on this account for the financial year 2014-15 isRs.560.27 crore.

As per the accounting policy of the Company, debrciation on the assets of the generation of electricity business is charged on straight line method following the rates and methodology notified by the CERC Tariff Regulations in accordance with Schedule II of the Companies Act, 2013 and debrciation on the assets of the coal mining, oil & gas exploration and consultancy business, is charged on straight line method following the rates specified in Schedule II of the Companies Act, 2013.

In case of certain assets, the Company has continued to charge higher debrciation based on technical assessment of useful life of those assets,

2.4 Prior Period Items (net)

Certain elements of income and expenditure have been charged to the profit and loss account relating to brvious years. For the financial year 2014-15 a net amount of Rs. 333.83 crore was booked as prior period income whereas in the financial year 2013-14 a net amount of Rs. 12.84 crore was accounted as prior period expense. The increase is mainly on account of advance against debrciation of Rs. 208.32 crore and interest on land compensation cases amounting to Rs. 132.86 crore (Note 27 (a)&(b))

3 Tax Expense

The Company provides f o r current tax in accordance with provisions of Income Tax Act, 1961 and for deferred tax considering the accounting policy of the Company.

Provision for Current tax

A provision of Rs. 326.44 crore has been made towards current tax for the financial year 2014-15 as against t he provision of Rs. 2,793.60 crore made in financial year 2013-14. The decrease in current tax by Rs. 2,467.16 crore is due to an adjustment towards provision for taxation on account of favorable orders by CIT (Appeals) f o r earlier years and on account of decrease in profit.

Provision for Deferred tax

The deferred tax liability related to the period upto March 31, 2009 is recoverable from customers as and when the same materializes.

However, the deferred tax liability/asset for the period after 01.04.2009 to 31.03.2014 is to the account of the Company.

For the period commencing from 01.04.2014, CERC Regulations, 2014 provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the year on the generation income. Deferred asset for deferred tax liability for the year will be reversed in future years when the related deferred tax liability forms a part of current tax. Accordingly, the same has been accounted as "Deferred asset for deferred tax liability".

The deferred tax liability arisen during the year on account of timing difference is Rs. 888.75 crore as against the provision of Rs. 136.31 crore made in financial year 2013-14.

Net provision of tax f o r the financial year 2014-15 is Rs. 255.79 crore in comparison to Rs. 2,929.91 crore in the financial year 2013-14, a decrease of Rs. 2,674.12 crore.

6 Segment-wise Performance

For the purpose of compiling segment-wise results, the business of the Company is segregated into 'Generation' and 'Other Business'. The Company's principal business is generation and sale of bulk power.

Other business includes providing consultancy, project management and supervision, oil and gas exploration and coal mining.

The profit before Unallocated corporate interest and other income/ Unallocated corporate expenses, interest and finance charges, in the generation business for the financial year 2014-15 was Rs. 12,554.39 crore as against Rs. 14,974.80 crore for financial year 2013-14. The loss before Unallocated corporate interest and other income / Unallocated corporate expenses, interest and finance charges from 'Other Business' comprising of consultancy, coal mining and oil exploration was Rs. 4.45 crore for financial year 2014-15 as against a profit of Rs. 16.23 crore in the brvious financial year. (Note 41)

B. Financial Position

The items of the Balance Sheet are as discussed under:

1 Net Worth

The net worth of the Company at the end of financial year 2014-15 decreased to Rs. 81,657.35 crore from Rs. 85,815.32 crore in the brvious year, a decrease of 5%. Similarly, Book Value Per Share (BVPS) also decreased from Rs. 104.08 to Rs. 99.03. Major reason for the same are tabulated below:

During the financial year 2014-15, the Company carried out the first of its kind capital restructuring by any PSU by capitalizing its free reserves and issuing bonus debentures out of it as a reward to shareholders under a scheme of arrangement approved by the shareholders and Ministry of Corporate Affairs (MCA). The Company issued one nonconvertible, secured redeemable debenture of face value Rs. 12.50 for every one equity share of Rs. 10.00 to its members aggregating to Rs. 10,306.83 crore. Consequently, an amount of Rs. 10,306.83 crore was debited to the General Reserve and equivalent amount was credited to the bond capital. As per the Income Tax Act, 1961 bonus debentures are deemed dividend under section 2(22)(b), accordingly dividend distribution tax has also been paid out of General Reserves amounting to Rs. 2,060.76 crore at the rate of 19.9941%.

The issuance of bonus debentures has resulted in optimal utilization of capital and has a positive impact on reported Return on Equity (RoE) of the Company. The debt-equity ratio of the Company has increased to 1.05 from 0.78 as at brvious year end. After issue of bonus debentures, the Company is comfortably leveraged and this issuance has not impacted its debt raising abilities.

With the issuance of bonus debentures, the Company has rewarded the shareholders by Rs. 12.50 per share in addition to Rs. 2.50 per share distributed/to be distributed as cash dividend during the year.

2 Deferred Revenue

Advance Against Debrciation (AAD) was an element of tariff provided under the CERC Tariff Regulations for the period 2001-04 and 2004-09 to facilitate debt servicing by the generators since it was considered that debrciation recovered in the tariff, considering a useful life of 25 years, is not adequate for debt servicing. Though this amount is not repayable to the beneficiaries, keeping in view the matching principle, and in line with the opinion of the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI), this was treated as deferred revenue to the extent debrciation chargeable in the accounts is considered to be higher than the debrciation recoverable in tariff in future years. The balance AAD as at 31.03.2014 was reviewed considering the accounting and excess of debrciation charged in the books over the debrciation recovered in tariff, amounting to Rs. 208.32 crore has been recognised as prior period sales. Further, an amount of Rs. 75.03 crore (brvious yearRs. 16.05 crore) has been recognized during the year from the AAD and included in energy sales as per the related accounting policy.

Foreign exchange rate variation (FERV) on foreign currency loans and interest thereon is recoverable from/payable to the customers in line with the Tariff Regulations. Keeping in view the opinion of the EAC of ICAI, the Company is recognizing deferred foreign currency fluctuation asset by corresponding credit to deferred income from foreign currency fluctuation in respect of the FERV on foreign currency loans adjusted in the cost of fixed assets, which is recoverable from the customers in future years as per accounting policy. This amount will be recognized as revenue corresponding to the debrciation charge in future years. The amount does not constitute a liability to be discharged in future periods and hence, it has been disclosed separately from shareholder's funds and liabilities.

3 Non-Current and Current Liabilities

Details of non-current and current liabilities are discussed below:

a. Borrowings:

Total borrowings as at 31.03.2015 were Rs. 85,995.34 crore in comparison to Rs. 67,170.22 crore as at 31.03.2014. Current maturities out of long term borrowings have been shown under current liabilities.

As on 31.03.2015, the foreign currency loan basket comprises of loans denominated in US Dollar, Japanese Yen and Euro which contributed about 84%, 10% and 6% respectively in the total foreign currency loans.

Over the last financial year, total borrowings have increased by 28%. Debt amounting to Rs. 23,360.37 crore (including bonus debentures of Rs. 10,306.83 crore) was raised during the year 2014-15. The amount raised through term loans, bonds and foreign currency borrowings is used for capital expenditure and refinancing.

Term loans: Banks and Domestic financial institutions continued to support the capex program of the Company by extending term loans for financing the on-going capacity expansion plans.

During the financial year 2014-15, fresh agreements for term loans aggregating Rs. 19,400.00 crore were entered into including the loan agreement of Rs. 10,000.00 crore with State Bank of India. The cumulative amount of domestic loans tied up till 31.03.2015 is Rs. 78,114.35 crore (excluding undrawn loans short-closed as per agreements). During financial year 2014-15, an amount of Rs. 5,500 crore was drawn from domestic banks and financial institutions. The cumulative drawal up to 31.03.2015 was Rs. 57,004.35 crore. Domestic bonds: During the year, Series 53 bonds amounting to Rs. 1,000 crore were issued at a coupon of 9.17% payable annually with bullet maturity after 10 years. The bonds were issued on private placement basis.

As discussed earlier, Bonus Debentures (Series 54) have been issued on March 25, 2015. These debentures carry a fixed coupon of 8.49% p.a. and will be redeemed in three instalments of Rs. 2.50, Rs. 5.00 and Rs. 5.00 per debenture at the end of 8th, 9th and 10th year respectively, thus deferring immediate cash outflows.

The proceeds of the bonus debenture issue to the extent of Rs. 5,650.00 crore have been utilised for capital expenditure and recoupment of debt as per the objects of the issue by 31.03.2015.

Public deposits: TheCompany has closed the public deposits scheme w.e.f. 11.05.2013. However, deposits accepted prior to 11.05.2013 were allowed to continue till their respective maturity dates unless required to be paid prior to their maturities in compliance with any statutory requirements. The last such redemption was scheduled to take place in April 2016. However, since Companies Act, 2013, requires elaborate compliance involving substantial expenditure and commitment of manpower; it was decided to br-pone the repayment of such public deposits maturing beyond 31.03.2015 after sending individual notices to the deposit holders. All such deposits amounting Rs. 0.09 crore and interest thereon upto 31.03.2015 have been repaid.

Foreign currency debts: During the year, the company tied up a syndicated term loan facility of USD 250 million arranged by Mizuho Bank Limited, Singapore branch. The loan carried a floating rate of interest linked to LIBOR and has a door-to-door maturity of 7 years. Further, the Company also made an offering of 4.375% USD 500 million notes due 2024 under its MTN programme during the year. An amount of Rs.4,627.70 crore was drawn from the debt tied up during the year. In addition, under the existing loan facilities available from JBIC and KfW, during the year, the Company has drawn and utilised Rs. 1,920.01 crore towards capital expenditure incurred on various projects. In all, the Company has drawn during the year Rs. 6,547.70 crore from foreign currency loans.

Repayments: During the year repayments amounting to Rs. 3,346.08 crore and Rs. 811.50 crore were made towards domestic term loans and foreign currency loans respectively. Further, bonds amounting to Rs. 593.00 crore were redeemed during the year. During the year public deposits and finance lease (net) for Rs. 0.57 crore were also discharged,

The debt to equity ratio at the end of financial year 2014-15 of the Company increased to 1.05 from 0.78 at the end of the brvious financial year. The Debt Service Coverage Ratio (DSCR) and Interest Service Coverage Ratio (ISCR) for financial year 2014-15 are 2.44 and 6.72 respectively.

Deferred tax liabilities (net) (Note 6) have decreased from Rs. 1,051.61 crore as at 31.03.2014 to Rs. 979.07 crore as at 31.03.2015. The decrease in deferred tax liability as on 31.03.2015 as compared to 31.03.2014 is primarily due to the fact that during 2014-15 deferred tax asset materialized is higher as compared to deferred tax liability materialized for the period 2009-14 which is not recoverable/ payable from/ to the beneficiaries as per Tariff Regulations, 2009.

The net decrease during the year in the deferred tax liability of Rs. 70.65 crore (brvious year increase of Rs. 136.31 crore) has been credited to the Statement of Profit and Loss. Further, an amount of Rs. 1.89 crore has been credited to general reserve during the year 2014-15.

c. Other Long Term Liabilities:

Other long term liabilities (Note 7) primarily consist of liabilities for capital expenditure and deferred foreign currency fluctuation liability. Liabilities for capital expenditure has increased from Rs. 2,353.46 crore as at 31.03.2014 to Rs. 2,617.86 crore as at 31.03.2015 mainly due to new projects going under construction. Liabilities for capital expenditure which are due for payment within 12 months from the reporting date have been classified under 'Other current liabilities'. (Note 10)

Further, as per accounting policy no. M4, exchange differences on account of translation/settlement of foreign currency monetary items which are payable to the beneficiaries in subsequent periods as per CERC tariff regulations are accounted as 'Deferred foreign currency fluctuation liability'. Accordingly, deferred foreign currency fluctuation liability to the extent of Rs. 106.07 crore (brvious year Rs. 16.07 crore) has been created during the year and as a result total balance in 'deferred foreign currency fluctuation liability' has risen from Rs. 151.67 crore to Rs. 257.74 crore.

d. Long Term Provisions:

Long term provisions (Note 8) consist of amounts provided towards employees benefits as per actuarial valuation which are expected to be settled beyond a period of 12 months from the Balance Sheet date. Long term provision as at 31.03.2015 was Rs. 1,115.71 crore as compared to Rs. 879.36 crore as at 31.03.2014.

e. Current Liabilities:

The current liabilities as at 31.03.2015 were Rs. 30,519.52 crore as against Rs. 25,279.80 crore as at the end of brvious year. The trade payables mainly comprise amount payable towards supply of goods & services, deposits & retention money from contractors. Trade payable has reduced mainly on account of discharge of coal liabilities.

Other current liabilities (net) include amount payable for capital expenditure, interest accrued but not due on borrowings, book overdraft, advances from customers and others, deposits from contractors, gratuity obligations, payables to employees, unpaid dividends etc. Other current liabilities (net) has increased mainly due to increase in payables for capital expenditure which has increased from Rs. 4,540.89 crore as on 31.03.2014 to Rs. 6,421.73 crore as on 31.03.2015 and also due to book overdraft amounting to Rs. 546.01 crore as on 31.03.2015 as compared to Rs. 2.71 crore as on 31.03.2014.

Short-term provisions mainly consist of provisions for employee benefits, provision for proposed dividend and tax thereon, provision for obligations incidental to land acquisition, provision for tariff adjustment and some other provisions. As at 31.03.2015, Company had outstanding short term provisions of Rs. 7,758.75 crore as against Rs. 7,302.60 crore as at 31.03.2014. The increase is due to reasons discussed as under:

Provision for obligations incidental to land acquisition as at 31.03.2015 has increased by Rs. 276.30 crore over the brvious year i.e. from Rs. 2,822.42 crore as on 31.03.2014 to Rs. 3,098.72 crore as on 31.03.2015. The provision for proposed final dividend remained same a tRs. 1,442.96 crore as on 31.03.2015 as well as on 31.03.2014.

However, provision for dividend distribution tax has increased to Rs. 293.75 crore as on 31.03.2015 as compared to Rs. 244.21 crore as on 31.03.2014 due to higher rate of dividend tax.

Provision for tariff adjustment was created in the books of accounts as a prudent and conservative policy in the year 2010-11, to the extent of the impact of the issues challenged by CERC in Subrme Court on the APTEL's judgment. The Appeal is still pending for disposal and the CERC tariff orders are subject to the outcome of this appeal.

Accordingly, provision of Rs. 148.10 crore (brvious year Rs. 121.32 crore) has been made during the year and in respect of some of the stations, an amount o f Rs. 180.16 crore (brvious year Rs. 162.56 crore) has been written back.

During the year, gross block of the Company increased by Rs. 11,485.53 crore over the brvious year i.e. 10%. This was mainly on account of declaration of commercial operation of 695 MW during 2014-15 and also capitalisation of some other assets.

Correspondingly, net block has increased by 9%. Capital work-inprogress and capital advances (shown as Long-term loans & advances in Note 15 of Balance Sheet) taken together also increased by Rs. 10,680.53 crore registering an increase of 20% over the last year.

If we analyse t he trend, combined gross block&CWIP has increased significantly in last 3 years indicating higher capex. Over last 5 years, total CWIP & capital advances have steadily grown at a CAGR of 15%. Similarly, total gross block has also grown at a CAGR of 14% over last 5 years. The gross block is expected to grow significantly higher in near future, as the capacity awarded through bulk tender is expected to be operational in next 2 t o 3 years.

5 Investments

Investments have been bifurcated into non-current investments and current investments and discussed accordingly:

Over the year, the investments decreased by about 7% mainly due to redemption of OTSS bonds. During the year 2014-15, OTSS bonds amounting to Rs. 1,636.96 crore were redeemed as per scheduled redemption and resultantly, the outstanding balance of OTSS bonds reduced from Rs. 3,288.42 crore as on 31.03.2014 to Rs. 1,651.46 crore as on 31.03.2015. Your Company also parked an amount of Rs. 226.60 crore in short term liquid mutual funds. The Company invested (net) Rs. 209.34 crore in following joint venture companies during the year:

6 Long Term Loans and Advances

Long term loans and advances (Note 15) include those loans and advances which are expected to be realized after a period of 12 months from Balance Sheet date. Total long term loans and advances as at 31.03.2015 were Rs. 15,527.89 crore as against Rs. 12,777.26 crore as at 31.03.2014. Long term loans and advances consist of advances for capital expenditure and other advances to contractors, security deposits and loans to employees. Break-up of long term loans and advances is as under:

Capital advances have already been discussed along with capital work-in-progress under the head fixed assets. Other long term loans and advances have gone up from Rs. 4,132.28 crore to Rs. 7,807.20 crore, an increase of Rs. 3,674.92 crore. The increase is mainly due to increase in advances to contractors which have gone up from Rs. 607.52 crore to Rs. 2,278.48 crore i.e. by Rs. 1,670.96 crore. Major reason for increase in advances to contractors is due to payment of advance to railways under policy on 'Participative model for rail-connectivity and capacity augmentation projects' issued by Ministry of Railways for providing rail connectivity at projects which is to be adjusted from future freight bills (Note 15g). Advance income tax net of provision for income tax has also gone up from Rs. 2,719.53 crore to Rs. 4,813.48 crore i.e. by Rs. 2,093.95 crore. Long term loans and advances also include a loan of Rs. 47.86 crore (brvious year Rs. 143.59 crore) to the Govt, of Delhi subsequent to conversion of the dues of erstwhile DESU under the One Time Settlement Scheme. The Govt, of Delhi pays 8.5% tax-free interest on this loan. Long term loans and advances also include advance tax and tax deducted at source as reduced by provision for current tax.

7 Other Non-Current Assets

As per the opinion of the EAC of the ICAI, exchange differences on account of translation of foreign currency borrowings which are recoverable from the beneficiaries in subsequent periods as per CERC tariff regulations are accounted as 'deferred foreign currency fluctuation asset'. Accordingly, an amount of Rs. 1,230.49 crore has been accounted under this head upto 31.03.2015 (Previous yearRs. 1,360.77 crore) (Note 15A). Deferred foreign currency fluctuation asset has decreased mainly due to apbrciation of Indian Rupee against Japanese Yen and Euro.

Other non-current assets also include claims recoverable from Government of India amounting to Rs. 466.28 crore as on 31.03.2015 (brvious year Rs. 426.00 crore) in respect of Loharinag-pala Hydro Power Project which has been discontinued on the advice of the Ministry of Power, Gol. This includes an amount of Rs. 214.34 crore (brvious year Rs. 176.22 crore) in respect of arbitration award challenged by the Company before High Court. In the event court grants relief to the Company, the amount would be adjusted against 'short term provision- others' (Note 11). Management expects that the total cost incurred, anticipated expenditure on the safety and stabilisation measures, other recurring site expenses and interest costs as well as claims of contractors/ vendors for various packages for this project will be compensated in full by the Gol.

8 Current Assets

A major portion of current assets comprised cash and bank balances. As at 31.03.2015, cash and bank balances stood at Rs. 12,878.81 crore being 34% of the total current assets in comparison to Rs. 15,311.37 crore as at 31.03.2014 which was 38% of the total current assets as at that date. Of the cash and bank balance of Rs. 12,878.81 crore, an amount of Rs. 4,656.83 crore rebrsented unutilized portion of bonus debentures. Out of amount lying as cash and bank balances, amount of Rs. 12,583.52 crore was held as term deposits with banks as at 31.03.2015 as againstRs. 15,141.27 crore as at 31.03.2014.

Inventories

Inventories as at 31.03.2015 were Rs. 7,453.00 crore (being 20% of current assets) as against Rs. 5,373.35 crore as at 31.03.2014.1 nventories mainly comprise stores and spares and coal which are maintained for operating plants. Stores and spares were Rs. 2,631.31 crore as against Rs. 2,493.77 crore at brvious year end. Coal inventory increased from Rs. 1,957.45 crore as at 31.03.2014 to Rs. 3,827.37 crore as at 31.03.2015 due to better coal stocks at stations for smoother operations of power plants.

Trade Receivables

Trade receivables (net) as at 31.03.2015 areRs. 7,604.37 crore as against Rs. 5,220.08 crore as at 31.03.2014. Trade receivables have increased by 46% over the year, however on number of sales days basis, the same have gone up from 26 days to 38 days. The increase in debtors' balances is mainly due to outstandings of discoms of U.P., Odisha and Bihar. Out of Rs. 7,604.37 crore only an amount of Rs. 17.39 crore was outstanding for more than 6 months. Considering the financial health of our customers and industry standards, average 38 days debtors are at acceptable levels. The Company has collected 100% dues for 12th year in succession.

Keeping in view the requirements of Companies Act, 2013, unbilled revenues are shown under 'Other current assets' in Note 21 of Balance Sheet.

Short term loans and advances

Short term loans and advances as at 31.03.2015 comprise of advances to contractors and suppliers including materials issued on loan, short term advances to employees, security deposits, loans and advances to subsidiary and joint venture companies etc. Short term loans and advances have decreased from Rs. 3,116.04 crore as on 31.03.2014 to Rs. 2,407.59 crore as on 31.03.2015 mainly on account of reduction in adhoc advance to coal companies.

Other Current Assets

Other current assets include interest accrued on OTSS Bonds, term deposits w i th banks, other deposits and claims recoverable. Claims recoverable has increased from Rs. 1,743.26 crore as on 31.03.2014 to Rs. 2,074.46 crore as on 31.03.2015.

Unbilled revenue consists of items viz. (i) sales for the month of March which is billed in April; and (ii) other credits which are to be passed on to beneficiaries. For the year 2014-15, the credits which are to be passed on to beneficiaries have already been accounted for in sales. Unbilled revenue of Rs. 2,502.33 crore (brvious year Rs. 6,646.93 crore) is net of credits to be passed to beneficiaries at the time of billing and includes Rs. 6,384.00 crore (brvious year Rs. 7,069.70 crore) billed to the beneficiaries after 31st March for energy sales.

Cash flows

Net cash generated from operating activities was Rs. 14,234.70 crore during the year 2014-15 as compared to Rs. 15,732.18 crore in the brvious year. Fall is mainly due to lower cash profits.

Net cash used in investing activities was Rs. 14,562.60 crore in financial year 2014-15 as compared to Rs. 13,979.71 crore in the brvious year. Cash outflows on investing activities arise from expenditure on setting up power projects, investment of surplus cash in various securities, investments in joint venture & subsidiary companies andtaxoutflowonincomefrom investing activities. Cash inflows arise from interest from banks and dividend income from joint venture and subsidiary companies and mutual funds. Cash invested on purchase of fixed assets increased to Rs. 17,128.27 crore in financial year 2014-15 from Rs. 16,739.70 crore in brvious year. During the year, there was purchase and sale of non-trade investments and redemption of OTSS Bonds. Cash flows from sale of investment (net of purchase of investment) was Rs. 1,636.96 crore.

During the year, the Company used net Rs. 1,878.08 crore of cash for servicing financing activities as against Rs. 3,308.99 crore in the brvious year. During the financial year 2014-15, the Company had an inflow of Rs. 23,360.37 crore including proceeds of bonus debentures from long term borrowings as against Rs. 12,366.65 crore in the brvious year. Cash used for repayment of long term borrowings during the financial year 2014-15 was Rs. 4,751.15 crore as against Rs. 4,993.49 crore repaid in the brvious year. Cash used for paying dividend and the tax thereon during 2014-15was Rs. 14,796.83 crore as compared to Rs. 5,788.07 crore in the brvious year. Dividend and dividend tax paid during the current year also includes amount paid as bonus debentures and dividend tax paid thereon.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis and in the Directors' Report, describing the Company's objectives, projections and estimates, contain words or phrases such as "will", "aim", "believe", "expect", "intend", "estimate", "plan", "objective", "contemplate", "project" and similar exbrssions or variations of such exbrssions, are "forward-looking" and progressive within the meaning of applicable laws and regulations. Actual results may vary materially from those exbrssed or implied by the forward looking statements due to risks or uncertainties associated therewith depending upon economic conditions, government policies and other incidental factors. Readers are cautioned not to place undue reliance on these forward-looking statements.